Articles in Category: Ferrous Metals

Mining giants BHP Billiton and Rio Tinto Group are both shifting to a growth strategy after years of cost cutting and oil’s rally may be over.

BHP Joins Rio in Growth Shift

BHP Billiton has talked up its future growth options, joining fellow mining giant Rio Tinto in marking a shift in focus after four years of aggressive cost cutting. While big miners are still looking to sell assets to help cut debt or to exit businesses like nickel and coal, they are also preparing for a pick-up in demand as looming supply gaps in at least some commodities sow the seeds for higher prices.

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While the big miners are still looking to sell assets to help cut debt or to exit businesses like nickel and coal, they are also preparing for a pick-up in demand as looming supply gaps in at least some commodities sow the seeds for higher prices.

Oil Rally Loses Momentum

The rally that carried oil prices up by more than $20 per barrel between the middle of January and the end of April seems to have run out of steam for the time being. Spot crude prices, time spreads and refining margins have all showed signs of weakening since the start of this month.

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Reuters’ John Kemp writes that prices for both West Texas Intermediate and Brent Crude recently closed below their 14-day and 20-day moving averages for the first time since early April.

The MetalMiner monthly GOES MMI reading dipped slightly from 202 to 195 against smaller import volumes. Market participants report to MetalMiner that grain-oriented electrical steel prices have fallen a bit in China, as well, though non-grain-oriented electrical steels have increased.

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However, AK Steel did add a surcharge of $65 per metric ton effective with June orders, the first higher surcharge since January.


According to recent comments made by Roger Newport, CEO of AK Steel, demand appears solid for high-efficiency electrical steel. He also pointed to stronger housing starts, though they remain below historical norms. In addition, Newport indicated the new transformer efficiency standards would help with overall demand. AK Steel also received a boost when ATI closed its Bagdad facility in Gilpin, Pa., driving approximately 35,000 tons of new business to AK Steel.

Steel Rising

In the meantime, the steel market price rise, in general, appears more supply-driven as opposed to demand-driven. Many have questioned whether any more new demand will appear during the second half of the year which means that for prices to stay supported, producers will need to remain vigilant about managing capacity. Some believe prices will flatten during the summer and then start slipping toward the end of the year.

Although GOES markets don’t closely correlate with underlying steel markets, some of the drivers of steel prices also apply to electrical steel. These drivers include: China’s ability to hold prices higher (we have started to see some cracks in that foundation). Unlike in the U.S., Chinese producers work together to set market prices, a recovery in products and materials used in the oil and gas industry on the basis of a rising oil price and, finally, the overall health of commodities markets and base metal prices.

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Our Stainless MMI rose 6% to 54 points in May. Similar to copper prices, nickel prices are showing a recovery this year, but the gains have been small compared to other industrial metals.

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Nickel’s price fall last year caused some miners to curb production. Some of these production cuts went into effect in 2015, helping prices to find a floor this year. However, the cuts haven’t been enough for the markets to really make a bull run. Global nickel supply is still running strong as the supply side has proved quite inelastic to low prices with most producers hanging on while they hope Chinese pig-iron producers will close down first.


Recently, Russia’s Norilsk Nickel, the world’s largest nickel miner, said that in order for a sustained recovery to happen, more cuts will have to materialize. According to the company, over 20% of the global nickel supply needs to be cut if we want to see a sustained recovery in prices. However, we have yet to see anything close to that since, so far this year, there haven’t been any supply cut announcements. The latest significant production cut was announced late in 2015. Read more

Chinese commodity futures markets experienced a broad crash Monday morning and a possible buyer for Tata Steel U.K. met with bankers Friday.

Chinese Commodity Futures Markets Crash

Chinese commodities futures fell almost across the board on Monday, led by 6% drops in steel and iron ore futures, as worries about waning demand in the world’s top consumer of most industrial materials extended last week’s slide.

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Speculative funds had rushed into China’s commodities futures last month, betting that the country’s economy was bottoming out, alarming exchanges and regulators who feared a new bubble was forming as volumes and prices soared.

Excalibur Meeting With Banks Over Possible Tata U.K. Purchase

Excalibur Steel, the management buyout group interested in purchasing Tata Steel‘s assets in Britain, met with bankers on Friday to seek financing for the deal. Tata U.K. executive Stuart Wilkie, who leads the group, said that it will hold talks with one British and three international banks to present its proposal to save the loss-making business from the threat of closure.

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Cinco de Mayo is today. I am sure many an American reader will take the opportunity to savor some Mexican tequila.

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I began my career at Mexico’s only stainless steel mill, Mexinox (now part of the Finnish company Outokumpu), which supplied tequila distilleries with the stainless steel used for fermentation and storage tanks. Tequila is a quintessential Mexican drink and was enjoyed by many a customer visiting the Mexinox plant (off-site, of course).


Source: Katie Benchina Olsen/MetalMiner.

After a tour of the plant, it was only appropriate that we gave our customers commemorative bottles of Mexinox-branded El Gran Viejo Tequila to bring back home to the States. I thought it would be interesting to examine just how stainless is used in tequila production.

Why is stainless steel in tequila production? Of course, stainless vats are a sanitary choice; however, stainless does not impart any additional flavors into the mixture of blue agave juice and the distinctive water called the mosto.

Tequila is distilled twice in accordance with Mexican law. Because no leeching occurs in either the fermentation or distillation process when stainless is used, the resulting tequila “blanco” is clear in color and solely the result of the fermentation of the agave juice and spring water.

The addition of proprietary yeast — and classical music in some cases, finishes out the blend.

A former colleague of mine shared that Cazadores plays classical music in the fermentation room because the sound waves create a soft stirring in the tanks that aides in the fermentation process. Many people describe the resulting tequila after two distillation processes as being light with citrus or aloe vera notes. Blanco tequila is aged less than two months in stainless barrels and then bottled. The darker colored tequilas are those that have been aged in oak barrels which means the tequila takes on the flavors of the wood and the harshness of the alcohol mellows.

Anejo or Reposado?

Reposado is aged two months to under a year, and anejo is aged from one to three years. Once the aging is complete, the tequila can then be stored in stainless tanks again until it is bottled.

Stainless steel is a neutral container that allows the natural elements of the blue agave to be fully experienced. The soil and climate have an impact on the taste of the blue agave hearts.

Tequila from the lowland blue agaves is described to have an earthy flavor whereas the highland blue agaves yield sweeter and fruitier flavors. The other factor in the taste of the finished product is the water which is combined with the blue agave juice.

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Just as bourbon has a unique taste because of the limestone in the Kentucky water, tequila has a special taste because the regional water is high in mineral content. Stainless steel allows all of these factors of Mother Nature to mix together to create a unique tequila without adding any of its own character. By the way,  Mother Nature had a way of bringing tequila to us, supposedly, by a farmer’s wife seeing a rabbit gnawing on a fermented agave plant, according to the Suerte website. I suppose it was luck “suerte” that brought tequila to civilization.

Steel prices continued to soar in April, holding their place as the best price performer among industrial metals this year.

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In Q1, it appeared that anti-dumping actions were the only force causing steel prices to rally. That questioned the longevity of the price rally since steel buyers could always turn to international suppliers for cheaper prices if domestic prices overextended. However, the picture has recently changed.

China Steel Prices Surge on Government Stimulus

Prices are not just rising domestically but globally, particularly in China. Chinese steel prices have jumped over 40% in a matter of weeks. Take HRC prices, in the U.S. they have increased in the ballpark of 30% so far in 2016 while Chinese HRC prices have now risen over 50% this year.


China’s not-so-mini fiscal stimulus, initiated late last year, has really picked up momentum in recent weeks. Across a number of metrics, China’s economy has surged this year driving a risk on sentiment among investors, the strength of which has caught many by surprise.

In Q1, China’s industrial production rose 5.8% year-on-year, the highest growth figure since June 2015. State banks and local governments are also pumping money into fixed asset investment (FAI). In Q1, FAI growth accelerated to 10.7%. The data indicates that China’s real estate investments grew due to rising home sales.

Raw Material Prices Rise

Of course, the rally in steel prices was also supported by a rise in raw material prices. Oil prices managed to climb above $45 a barrel, shaking off bearish news in April, a sign that underlying sentiment might be shifting in favor of higher prices. Iron ore prices climbed as high as $70.46 in April, the highest level in 15 months. Scrap prices also continued to rise in April.

Production Ramps Up

Global raw steel production during March reached its highest total in nine months with global raw-steel capacity utilization at 70.2%, up 3.9% from February although still 1.3% lower than the same period last year.

Previously, China committed to reduce its excess steel capacity. However, it doesn’t look like this will be in the form of supply cuts. For the month of March, China’s raw steel production increased 20.74% from February to 70.7 million metric tons, an increase of 2.9% over the March 2015 total. That seems to suggest that rising steel prices have only ensured that Chinese steel mills produce more of the metal. The big question is whether the stimulus-driven demand will be enough to absorb current supply. So far, markets seem optimistic about it.

Sustainable Price Rally?

These developments might only serve to prolong the problems of overcapacity in the steel industry but that doesn’t change the fact that we could see strong steel prices for at least much of the second half of the year. Prices could come down sometime in the future but, right now, momentum is clearly pointing upward for steel and for commodities across the board.

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Chinese stimulus programs suggest that lax lending and stimulus have, indeed, spurred a new infrastructure economic boom. China has stated that it doesn’t want to create an additional property bubble but there are reasons to be skeptical. Previously, China has shown that shot-in-the-arm stimulus programs often turn into prolonged addictive habits, perhaps spurring demand growth for longer than what most people anticipate.

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The “High Level Meeting on Excess Capacity and Structural Adjustment in the Steel Sector” recently held in Brussels and organized by the Organization for Economic Cooperation and Development produced recently released statements from member nations addressing the issues of global steel overcapacity and overproduction.

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The governments of Canada, the European Union, Japan, Mexico, the Republic of Korea, Switzerland, Turkey and the U.S. issued a statement noting two relevant issues. First, the “challenges facing the steel industry, have an important global dimension that needs to be addressed through ongoing international dialogue”;  and, second, that “while the challenges facing the industry arise from many factors, such as structural and cyclical economic developments, government support measures have contributed to significant excess capacity, unfair trade, and distortions in steel trade flows.”

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Much of the meeting was devoted to the problem of Chinese overcapacity. The signatory governments concurred on a number of steps that could be taken to address the challenges facing the global steel industry, including to:

  • Ensure that governments and government-supported institutions do not provide subsidies or other support that: 1) sustain uneconomic or consistently loss-making steel plants, 2) encourage investment in additional steelmaking capacity which would otherwise not be built; or, 3) otherwise distort competition.
  • Ensure that government plans, policies, directives and guidelines, whether issued or implemented by government entities or government-supported institutions, do not encourage the net expansion of steelmaking capacity and that all uneconomic or consistently loss-making steel enterprises are permitted to exit the market and close facilities.
  • Work together to identify and promote policies that address the detrimental impact of steel facility closures on workers and affected communities, while facilitating the closure of uneconomic or consistently loss-making facilities.
  • Enhance the exchange of information on: 1) capacity developments; and, 2) the formulation and implementation of the support measures and industrial policies being taken in steel.
  • Ensure that those enterprises in which their governments have full or partial ownership do not receive special benefits that distort competition.

Anti-Dumping Duties for Indian Welded Stainless Pressure Pipe

The Department of Commerce placed preliminary duties on imports of welded stainless pressure pipe from India yesterday.

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The investigation covers welded stainless pressure pipe, which is circular welded austenitic stainless pressure pipe not greater than 14 inches in outside diameter. Welded stainless pressure pipe is used to convey fluids at high temperatures, high pressures, or both, and is used by a variety of end use industries, including petrochemicals, manufacturing, oil and gas, chemical fluid handling, and water treatment.

Commerce preliminarily determined that imports of welded stainless pressure pipe from India have been sold in the U.S. at dumping margins of 1.91% and 18.90%.

U.S. construction spending increased in March to its highest level in more than eight years and our Construction MMI shot up 15.9% along with it. Gains in home building and nonresidential construction offset a drop in government projects.

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Construction spending rose 0.3% in March after a 1% gain in February, the Commerce Department said Monday. The back-to-back increases raised total spending to a seasonally adjusted annual rate of $1.14 trillion, the highest level since October 2007.



Residential construction grew at a 14.8% annual pace in the first three months of the year. It was one of the few sources of strength in a quarter in which the economy grew at an annual rate of just 0.5% — the slowest pace in two years.

Aluminum, steel scrap and copper all saw gains on the index, moves that are in line with the broad metals mix used in nonresidential and residential construction here in the U.S. In China, numbers are similarly positive.

Chinese housing data for March showed another increase in home sales, putting a dent in China’s housing oversupply and helping the construction reset there. As lower rates and yields work with a lag, sales growth could stay strong in China this year. A reduction in the requirement for a down payment by the central government is also underpinning increasing sales.

While China’s manufacturing purchasing managers index from Caixin Media and Markit Economics fell to 49.4, missing economists’ estimates for 49.8 and down from 49.7 in March, the construction numbers in the People’s Republic remain strong and could, theoretically, pick up the slack this year if manufacturing there remains depressed.

A total of 83.19 million metric tons of iron ore was discharged at Chinese ports during April, according to ship-tracking data compiled by Thomson Reuters Commodity Research and Forecasts.

This was up from the 81.76 mmt offloaded in March, suggesting that China’s iron ore import volumes will show an increase when preliminary customs data is released in the next few days.

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China is back to producing steel at a high rate. Even zombie mills have come back from the dead. While this might not be good for the oversupply situation, it is a good thing for construction estimators and procurement professionals looking for as many options as possible to fulfill orders and reduce prices via competition.

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U.S. new car and light-truck sales returned to the fast lane in April, setting a monthly high that put Detroit automakers back on track to claim a record for 2016 profits and our Automotive MMI increased as well.


Industry volume hit 1.5 million vehicles last month, a 3.6% increase year-on-year, according to data provider Autodata Corp., for a seasonally adjusted annualized pace of 17.4 million vehicles. That puts U.S. automakers on track for a second consecutive annual sales record.

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Honda led major automakers with a 14.4% sales increase as both its cars and SUVs sold well, while Nissan‘s sales rose 12.8%. Fiat Chrysler was up 6% on record Jeep sales, and Ford rode an April record for SUV sales to a 4% increase. Toyota sales rose 3.8% largely because of the RAV4 small SUV, which broke a monthly record with sales up nearly 32%.

Only General Motors and Volkswagen saw sales declines with GM blaming a 3.5% drop on a strategy of cutting low-profit sales to rental car companies. VW sales fell almost 10% as its emissions-cheating scandal continued.

The U.S. isn’t the only auto market on an upswing. European sales have been steadily rising for a few years and many of the markets in the Asia-Pacific region are growing, although at a more tepid pace than earlier this decade.

This month, we saw U.S. Steel file a section 337 case, alleging hacking and theft of intellectual property, against China. The suspected hacker stands accused of stealing the formula, production setup and even melting temperature for high-strength, automotive alloy Dual-Phase 980. U.S. Steel contends that the alloy showed up as a Baosteel product shortly after it was hacked.

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While individual cases like this one are not likely to affect the fundamentals of the automotive steel market, it does illustrate just how coveted a market automotive has become for high-strength steel, even as aluminum has not been as widely adopted as many predicted it would be by now, after Ford became the first automaker to make the jump.

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MonthlyMetalBuyingOutlook_May2016_210This month, What appeared to be a rally led by anti-dumping actions involving several different steel products turned into something bigger as China implemented stimulus measures, boosting demand growth not only for steel, but also for the rest of the base metal complex.

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